Key Highlights

  • The cash rate target rose to 4.60%, adding about $49 a month on a hypothetical $300,000 loan or $164 on $1,000,000, under stated assumptions.
  • The decision signalled that further increases remain on the table without committing to any.
  • Bullock said the full effect of rate changes takes 12 to 18 months, so the September rise starts a new lag on top of earlier ones.

For Australians on variable-rate home loans, the Reserve Bank's 29 September decision altered four things at once: the cash rate, the likely cost of repayments, the outlook for further moves and the timetable over which 2026's tightening plays out.

Variable-rate borrowers are usually the first to feel a change in monetary policy, because their interest rate can move with the cash rate. When the Reserve Bank of Australia's Monetary Policy Board lifted the cash rate target on 29 September 2026, it was the fourth such increase this year. Governor Michele Bullock acknowledged the impact plainly: "Now, I know this decision is difficult for households with a mortgage and businesses with loans".

What follows sets out what the decision actually changed, drawing on the RBA's statement, the minutes of the 28–29 September meeting and the Governor's media conference. It is a description of the policy shift, not guidance on what any borrower ought to do.

Changes one and two: the rate and the repayment

The first change is the headline number. The cash rate target rose by 25 basis points, from 4.35% to 4.60%, effective 30 September 2026. The decision was unanimous. The Board's statement had referred to "The three increases in the cash rate target since the beginning of the year", and Bullock said of September's move: "This is one more." Across 2026, that adds up to a full percentage point.

The cash rate is not the rate borrowers pay, but it heavily influences lender pricing. Christopher Kent, Assistant Governor (Financial Markets), said in August that lending and deposit rates had risen in line with the cash rate after the earlier increases this year. How and when any lender passes on the September rise is a matter for that lender.

That leads to the second change: the potential cost of repayments. The following figures are a hypothetical illustration only, not RBA estimates. They assume a 30-year principal-and-interest loan, a variable rate of 5.60% before 2026's rises, and full pass-through of all four increases to 6.60%. Actual lender rates vary.

  • $300,000 loan: roughly $1,722 a month at 5.60%, $1,867 at 6.35% and $1,916 at 6.60%. The total increase is about $194 a month, with September's 25 basis points adding about $49.
  • $1,000,000 loan: roughly $5,741 a month at 5.60%, $6,222 at 6.35% and $6,387 at 6.60%. The total increase is about $646 a month, with September's rise adding about $164.

Bullock did not understate the effect: "Those who have mortgages, yes, this clearly impacts them and it hurts them."

Change three: the signal about what comes next

The third change was to the outlook. Before September, the Board had raised rates three times between February and May, then made no further move until September. The September decision, and the language around it, made clear that further increases remain possible.

The statement said "a further tightening in financial conditions is warranted to support a return of inflation to target", and concluded: "The Board will continue to do what it considers necessary to bring inflation sustainably back to target". The minutes said the Board will consider "increasing the cash rate target further if required." Bullock was equally direct: "The Board will increase interest rates again if that's what's needed to get inflation down."

Yet she declined to pre-commit. "I'm not going to give you forward guidance," she said, and on whether September's move would suffice: "Will it be enough? I don't know."

Financial markets had their own view at the time. The minutes recorded that markets expected an increase at the September meeting, then about 15 basis points more by year-end and a further 30 basis points in the first half of 2027. That was market pricing at a point in time, not an RBA forecast, and it can shift as new data arrive.

The reason for the Board's stance is inflation. Underlying inflation, measured by the trimmed mean, was 3.6% over the year to the June quarter 2026, and headline CPI was 4.0% in the year to August. Bullock said underlying inflation had been "about 3.5 per cent for the past six months", or "a percentage point above our target". The RBA aims for the 2.5% midpoint of its 2–3% target range.

Change four: the clock on the full effect

The fourth change is less visible but matters for household budgets over time. Bullock said the full effect of interest rate changes takes 12 to 18 months. Kent made a similar point in August: "It takes some time for tighter monetary policy to have its full effect on economic activity and inflation."

That means September's increase starts a fresh lag, layered on top of the three earlier rises still feeding through. For variable-rate borrowers, the economic environment around them, from housing prices to the job market, may continue to adjust well into 2027 as a result of decisions already made.

Some of that adjustment is already visible. The statement noted "housing prices have fallen in most capital cities" and "new housing loans have declined noticeably". Unemployment rose to 4.6% in August, though the minutes cautioned that "considerable caution is warranted when interpreting the current official labour force data."

What the decision did not change

Several aspects of borrowers' collective position were not upended by September's move, according to the RBA's assessment. The minutes said scheduled mortgage payments were about 10% of household disposable income, near their 2024 peak, and Bullock noted this was similar to when the cash rate was 4.35%. Arrears were low and loan impairments around historical lows.

Fewer than 2% of owner-occupier borrowers had a cash flow shortfall, well below the 2023–24 peak. Median savings buffers ranged from just under one year of repayments for the lowest income quintile to almost two years for the highest. Bullock also observed that "a lot of people have a mortgage, and then they have an offset account, which sits in the background." The October Financial Stability Review found most mortgage holders should cope with harder conditions, while noting some pockets of stress.

These are system-wide figures and say nothing about any single household. Borrowers may wish to check their loan terms with their lender to understand how rate changes apply to them.

Upcoming dates are scheduled rather than predictive: September CPI data are due on 28 October, and the next cash rate decision is at 2.30 pm on 3 November 2026.

The bottom line

For variable-rate borrowers, the September decision lifted the cash rate to 4.60%, added to the potential cost of repayments (about $49 a month on a hypothetical $300,000 loan, or $164 on $1,000,000, under stated assumptions), signalled that further increases remain on the table without committing to any, and started a new 12-to-18-month lag on top of earlier rises. The RBA's assessment is that borrowers in aggregate remain broadly resilient, even as it acknowledges the decision hurts.

A cash-rate decision does not automatically change every borrower’s interest rate or repayment on the effective date. Any change depends on the lender’s pricing decision and the borrower’s loan terms.